Gold & Silver - Daily Outlook November 3

Gold and silver slightly inclined yesterday after they had declined in recent days.The FOMC meeting may have helped pull up the financial markets as Bernanke left the door open on additional steps by the Fed to jumpstart the U.S economy. Today,the ECB rate decision will be made (update the rate was cut to 1.25%), the G20 meeting, the U.S. ISM Non-Manufacturing PMI report will be published and the U.S. Unemployment Claims report.

Gold inclined on Wednesday by 1.04% to $1,729.6; silver also sharply rose by 3.70% to $33.94. The chart below shows the changes in gold and silver since October 20th. During the week (so far), gold decreased by 1.0% and silver by 3.8%.

The ratio between gold and silver sharply fell on Wednesday, November 2nd to 50.96. During the week, silver declined by a larger rate than gold as the ratio rose by 2.9%. The chart below shows the developed of this ratio since August.

Bernanke Keeps Door Open on Stimulus Plan

The Federal Open Market Committee decided to keep the monetary policy in the same direction including keeping the interest rates low and the LT securities purchasing plan. But The Fed chairman, Ben Bernanke, kept the door open of an additional stimulus plan in the near future to help fight the high unemployment rate. If there will be such as plan it could also affect the gold and silver.

On Today's Agenda:

ECB Press Conference and Euro Rate Decision: The rate decision will be the first one of the new President of the European Central Bank, Mario Draghi.Last month ECB kept the interest rate unchanged at 1.5%. According to the lastEuro Area inflation rate report, the inflation grew to 3.0% (annual terms) in September 2011. With respect to the recent EU debt agreement there is a chance that the ECB will lower the rate by 0.25 percent points. If this will be the case it could major commodities;

U.S. Unemployment Claims:initial claims fell by 2,000 to 402,000 claims for the week ending on October 22nd; the number of insured unemployment reached 3.645 million, a decrease of 96,000 during the week of October 15th; the upcoming report may affect commodities traders;

U.S. ISM Non-Manufacturing PMI: This report will present the changes of non-manufacturing sector during October 2011. In September this index slightly slipped to 53.0%; this index might affect forex and commodities traders (see here last report).

U.S. Treasuries / Gold & Silver– November

TheU.S. 10-year Treasury yield changed direction and slightly inclined on Wednesday by 0.02 percent points to 2.03%; during the week the 10 year treasury yield dropped by 0.31 percent point. The LT yields sharply fell in recent days and coincided with the sharp declines of gold and silver. If the yields will continue to decline, this might indicate a slowdown in the growth for risk appetite in the financial markets; this shift may also curb the demand for gold and silver.

Gold and Silver Outlook:

The slight bounce back in gold and silver yesterday may have been a correction to the sharp falls of the past couple of days; the recent downward trend coincided with the sharp declines in the stock and Forex markets and the increased demand for LT U.S. securities. This shift in the markets might indicate the cooling off the markets for riskier financial instruments. The news of the FOMC meeting may have helped to pull up the markets, but isn't likely to resonate, because there weren't any earth shattering news. Today's ECB rate decision might stir up the financial markets, if the ECB new president will decide to cut the interest rates. The changes in gold and silver are likely to keep on coinciding with the changes in the in major forex exchange rates such as USD/YEN, EURO/USD and AUD/USD.

For further reading:

Weekly Outlook for October 31 – November 4

Did the Liquidity Trap Cause the Hike in Gold Price?

Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.

By: Lior Cohen, Energy Analyst forTrading NRG